Nigeria’s headline inflation rate is projected to average 30.5% year-on-year in 2025, with a predicted decrease to 27.1% by December 2025, according to the latest NESG-Stanbic IBTC Business Confidence Monitor report.
This projection is based on the assumption that inflation will remain high through the first three quarters of 2025, largely driven by persisting fuel costs. However, as the impact of high petrol prices begins to fade from year-on-year inflation calculations, inflation is expected to drop below 30% from September 2025, barring any unforeseen negative shocks to petrol prices.
The report highlights that inflation remains a significant concern, with fuel costs and currency depreciation continuing to drive price hikes across all sectors of the economy.
The report states: “We expect headline inflation to remain sticky in 9M:25 but settle below 30.0 per cent from September 2025 as high petrol cost gets smoothened out of the year-on-year headline inflation, barring any unexpected negative shocks to petrol prices.”
In addition, the report anticipates that easing inflation could prompt the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to adopt a more accommodative monetary policy stance toward the end of 2025, potentially leading to lower interest rates. This shift would aim to stimulate economic activity as inflationary pressures subside.
The Nigerian economy is expected to grow by 3.5% year-on-year in 2025, slightly higher than the 3.2% growth forecast for 2024.
Business Performance and Sector Outlook
Business performance saw a modest improvement in December 2024, supported by seasonal festive demand. The Business Performance Index rose to +0.77, reflecting a slight recovery from the previous month’s -2.74 reading. This marked the first positive index reading since September 2024, signaling a modest uptick in economic activity.
However, the recovery was uneven across sectors. Agriculture emerged as the top-performing sector, buoyed by increased harvest activities and strong demand for agricultural produce, recording a net balance of +13.93. Meanwhile, the non-manufacturing industries also showed resilience with a net balance of +5.80. On the other hand, the manufacturing, trade, and services sectors continued to face significant challenges.
Despite a slight dip in the Future Business Expectation Index to +28.61 in December 2024 (down from +33.17 in November), there is still cautious optimism for improved business conditions in the first quarter of 2025, particularly in the agriculture, manufacturing, and non-manufacturing sectors.
In summary, while inflation remains a key challenge for Nigeria in 2025, there are indications of economic recovery, particularly in agriculture, with hopes for an easing of inflation and a more accommodative policy stance in the latter half of the year.
